SEC ‘Best Interest’ Proposal Reflects ABA-Supported Principles

August 7, 2018

In a comment letter to the Securities and Exchange Commission today, ABA offered feedback on the SEC’s proposal to implement a “best interest” standard of conduct for broker-dealers when making recommendations on securities transactions or investment strategies to retail customers. The SEC’s proposal would represent a different approach from the Labor Department’s fiduciary rule, which was vacated earlier this year in its entirety by a federal appeals court.

Under the SEC’s proposed Form CRS, firms would be required to provide “retail investors” with a summary at the beginning of the relationship containing information about duties, fees and conflicts of interest. ABA noted that the proposals put forth by the SEC are largely aligned with principles it has previously supported for the provision of investment advice to retain clients.

The association urged the SEC to allow dual employees of broker-dealers and banks or insurance agents to use the terms “adviser” or “advisor” in their titles, and to not define “retail investor” as a trust with a bank trustee.